Trillion-euro cost of German energy transition

20 February 2013

Germany's plan to transform its energy system to one reliant on renewable power as it phases out nuclear energy could cost up to €1 trillion, German energy and environment minister Peter Altmaier has publicly admitted. Feed-in tariffs supporting renewable energy could account for over two-thirds of the cost.

In an in-depth interview with Frankfurter Allgemeine, Altmaier said that costs for the plans to reform and restructure the country's energy sector by the end of the 2030s could reach €1 trillion ($1.3 trillion). Feed-in tariffs - guaranteed electricity prices designed to support the adoption of renewables such as wind and photovoltaics - would alone cost some €680 billion ($910 billion) by 2020. That figure could increase further if the market price of electricity fell, he warned.

In response, Altmaier said that together with economy minister Philipp Rösler he is proposing to reduce feed-in tariffs for new installations, saving up to €200 billion ($268 billion) over the next 20 years. Meanwhile, proposals to limit electricity price rises would help to bring renewables to market faster, he said.

"We now have perhaps the last great opportunity to create the structural prerequisites for success. This means that the energy transition must remain economically viable and affordable," Altmaier said.

Germany's Energiewende, or energy transition, was introduced after the country's government decided to phase out nuclear power in reaction to the accident at Japan's Fukushima Daiichi nuclear power plant in March 2011. At the time, Germany was obtaining around a quarter of its electricity from 17 nuclear reactors. Eight reactors were ordered to shut immediately by the government, while the remaining nine reactors will now face closure by 2022 at the latest. The country intends to establish a renewable generation share of 20% by 2020. Fossil fuels are expected to meet the remaining 80% after the final nuclear power plants shut down.

The summary closure of thousands of megawatts of nuclear capacity and the intention to rely instead on renewables has implications for the country's transmission grid. Plans to upgrade and expand the grid to support the energy transition were announced in May 2012. Later in the year, a study by the German Energy Agency (Dena) think-tank estimated that the necessary electricity distribution network expansion and rebuilding program would cost Germany at least €27.5 billion ($35.8 billion) and up to as much as €42.5 billion ($55.4 billion).

In the meantime, German utilities are seeking redress in the courts for the enforced closure of their nuclear plants and are also contesting a nuclear fuel tax imposed in January 2011, before the policy turnaround, in anticipation of extended plant operating lives. Although the plants' lives have been shortened dramatically, the tax remains in place.